FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.
Date of Report (Date of earliest event reported) March 31, 1997.
DCI Telecommunications, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 2-96976-D 84-1155-41
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
611 Access Road, Stratford, CT 06615
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(Address of principal executive offices)
Registrant's telephone number, including area code: (203) 380-0910
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(Former name or former address, if changed since last report.)
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS
In connection with the acquisition of CardCall International
Holdings, Inc. (previously reported on Form 8K, dated September 23, 1997),
attached are the audited financial statements for the years ending
March 31, 1997, 1996 and 1995.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
DCI Telecommunications, Inc.
Joseph J. Murphy
__________________________
Joseph J. Murphy
President
Date: August 31, 1998
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CARDCALL INTERNATIONAL HOLDINGS INC,
Consolidated Financial Statements
March 31,1997
(Expressed in United States dollars)
GREENWOOD SILVERSTEIN HERLICK & COHEN
GREENWOOD SILVERSTEIN HERLICK & COHENChartered Accountants
Independent Auditors' Report
To the Shareholders of CardCall International Holdings Inc.
We have audited the consolidated balance sheet of CardCall
International Holdings Inc. as at March 31, 1997 and the
consolidated statements of operations, deficit and changes in
financial position for the year then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the
company as at March 31, 1997 and the results of its operations and
the changes in its financial position for the year then ended in
accordance with accounting principles generally accepted in Canada.
Greenwood Silverstein Herlick & Cohen
Chartered AccountantsNorth York, OntarioMay 30,1997
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CARDCALL INTERNATIONAL HOLDINGS INC.
Consolidated Balance Sheets
(Expressed in United States dollars)
As of March 31,
1997 1996 1995
(Unaudited)
Assets
Current
Cash $ 48,795 $ 235,348 $ 37,274
Term deposits (note 8) 58,462 56,773 46,294
Accounts receivable 801,166 313,800 343,454
Sundry receivables 45,000
Inventory 218,227 157,247 55,957
Prepaid expenses 31,752 35,279 5,004
--------- ---------- --------
1,158,402 843,447 487,983
Fixed assets (note 4) 403,090 512,716 233,971
---------- ---------- --------
$1,561,492 $1,356,163 $730,111
Liabilities
Current
Accounts payable $2,402,543 $799,865 $204,468
Amounts due to long
distance companies (note 5) 1,862,573 405,060 101,419
Accrual for future long
distance services 631,750 208,770 71,469
Employee and sales taxes payable 11,877 47,483 8,039
Advances from related
parties (note 6) 464,528 183,492 60,749
Advances from DCI
Telecommunications Inc.(note 7) 1,500,000
Current maturities of term
bank loans 34,646 35,244 17,153
--------- --------- --------
6,907,917 1,679,914 402,548
Advances from related parties 179,800
Term bank loans, less current
maturities (note 8) 56,652 92,874 141,527
--------- --------- --------
6,964,569 1,952,588 604,824
Contingency and commitments (notes 10 and 11)
Net deficit
Capital stock (note 9) 1,837,312 839,871 180
Contributed surplus 130,105 130,105 130,105
Deficit (7,405,571)(1,573,098) (8,615)
Foreign currency
translation adjustment 35,077 6,697 3,617
---------- -------- --------
(5,403,077) (596,425) 125,287
---------- --------- --------
$1,561,492 1,356,163 $730,111
See accompanying notes.
GREENWOOD SILVERSTEIN HERLICK & COHEN
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CARDCALL INTERNATIONAL HOLDINGS INC,
Consolidated Statements of Deficit
(Expressed in United States dollars)
For Year Ended March 31,
1997 1996 1995
(Unaudited)
Deficit - beginning of year $(1,573,098) $ (8,615) $ (96,089)
Net (loss) income (5,832,473) (1,564,483) 87,474
Deficit - end of year $(7,405,571) $(1,573,098) $(8,615)
See accompanying notes.
GREENWOOD SILVERSTEIN HERLICK & COHEN 3
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CARDCALL INTERNATIONAL HOLDINGS INC.
Consolidated Statements of Operations
(Expressed in United States dollars)
For Year Ended March 31,
1997 1996 1995
(Unaudited)
Sales $4,776,227 $ 4,345,595 $ 2,718,948
Cost of sales 5,796,264 3,916,140 2,146,376
Gross (loss) profit (1,020,037) 429,455 572,572
Expenses
Sales and marketing 1,582,756 713,370 178,697
General and administrative 2,019,584 984,945 279,936
Financing costs 656,450
Bad debt expense 12,649 242,177 8,998
Bank charges and interest 255,949 53,446 17,467
Write-down of capital assets 285,048
--------- --------- ----------
4,812,436 1,993,938 485,098
Net (loss) income $(5,832,473)$(1,564,483) $87,474
See accompanying notes.
GREENWOOD SILVERSTEIN HERLICK & COHEN 4
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CARDCALL INTERNATIONAL HOLDINGS INC.
Consolidated Statements of Changes in Financial Position
(Expressed in United States dollars)
For Year Ended March 31,
1997 1996 1995
(Unaudited)
Funds provided (used)
Operating activities
Net (loss) income $(5,832,473) $(1,564,483) $87,474
Depreciation and amortization 474,431 288,131 62,141
Write-down of capital assets 285,048
Changes in operating elements of working
capital (excluding cash) 2,794,637 929,530 (100,363)
---------- -------- --------
(2,278,357) (346,822) 49,252
Financing activities
Issue of capital stock 997,441 839,791 100
Advances from related parties 281,036 363,292
Advances from DCI
Telecommunications, Inc. 1,500,000 (60,749) (689)
Term bankloans (36,820) (30,562) 158,680
--------- --------- -------
2,741,657 1,111,772 158,091
Investing activities
Additions to capital assets (528,686) (396,267) (163,092)
Licenses and design fees (121,167) (169,609) (10,196)
--------- --------- -------
(649,853) (566,876) (173,288)
(Decrease) increase in cash (186,553) 198,074 34,055
Cash
Beginning of year 235,348 37,274 3,219
End of year $ 48,795 $235,348 37,274
See accompanying notes.
GREENWOOD SILVIERSTEIN HERUCK & COHEN 5
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CARDCALL INTERNATIONAL HOLDINGS INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)
1. Going Concern
These financial statements have been prepared on a going concern
basis which contemplates the realization of assets and payment of
liabilities in the ordinary course of business. The company's
continued existence as a going concern is dependent upon the company
obtaining new financing and developing profitable operations.
Should the company be unable to continue as a going concern, it may
be unable to realize the carrying values of its assets and meet its
liabilities as they become due.
2. Consolidated Financial Statements
The Company was incorporated under the laws of the State of Delaware
on March 22, 1995. Pursuant to a reorganization that occurred on
January 26, 1996, the Company became the parent company of
CardCaller Canada Inc., incorporated under the Laws of the Province
of Ontario on September 22, 1992 and CardCall (UK) Limited
incorporated under the Laws of the United Kingdom. All companies
were under common control. This combination has been accounted for
as a pooling of interests.
These consolidated financial statements represent the consolidated
financial position and results of operations of CardCaller Canada
Inc. for the three years ended March 31, 1997 and the operations of
CardCall (UK) Limited which is currently in the development stage
from August 1995. All inter-company balances and transactions have
been eliminated.
The Companies are in the business of designing, developing and
marketing, through distributors, prepaid telephone phone cards which
provide the cardholder access to long distance service through its
switching facility. The Companies also develop telephone phone
cards which are sold as collectibles and custom cards for various
companies for promotions.
GREENWOOD SILVERSTEIN HERLICK & COHEN 6
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CARDCALL INTERNATIONAL HOLDINGS INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)
3. Summary of Significant Accounting Policies
Revenue recognition
Revenue from the sale of prepaid telephone phone cards is recorded
at the time of sale to customers less related merchant discounts and
commissions. The company accrues its cost for future long distance
services at the time of sale by reference to past experience.
Inventory
Inventory consists of telephone phone cards and is stated at the
lower of cost or market, with cost determined using the average cost
method.
Depreciation and amortization
Annual depreciation and amortization rates adopted by the company
are applied on the declining balance method as follows:
Computer equipment 25-33%
Displays 20%
Furniture and fixtures 20-25%
Leasehold improvements 20-33%
Licenses and design fees pertaining to specific projects are
amortized over the lesser of the life of the project or one year.
4. Fixed assets
Fixed assets are recorded at cost and are comprised as follows:
Accum. Net Book Value
Depr. ---------------------------
and
Cost Amort. 1997 1996 1995
(Unaudited)
Computer equipment $ 828,716 $503,203 $325,513 $457,258 $223,049
Displays 41,191 10,298 30,893
Furniture and fixtures 53,662 18,378 35,284 36,902 8,366
Leasehold improvements 26,357 14,957 11,400 18,556 2,556
--------- -------- -------- -------- --------
$ 949,926 $546,836 $403,090 $512,716 $233,971
GREENWOOD SILVERSTEIN HERLICK & COHEN 7
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CARDCALL INTERNATIONAL HOLDINGS, INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)
5. Amounts due to long distance companies
Amounts due to long distance companies totalling $552,000 have been
secured by the accounts receivable of CardCaller Canada Inc.
6. Advances from related parties
The advances from related parties are due on demand and bear
interest from the Libor rate plus 2% to 10% per annum. Interest
paid in the year amounted to $26,510 (1996 - $27,936).
7. Advances from DCI Telecommunications Inc.
The advances from DCI Telecommunications, Inc. are due on demand and
are secured by a general security agreement over the assets of
CardCaller Canada Inc. and CardCall (UK) Limited subject to prior
encumbrances.
8. Term bank loans
The term bank loans are payable $2,937 monthly plus interest at
1 1/2% above bank prime rate and are repayable as follows:
1998 $ 34,646
1999 34,646
2000 22,006
--------
$91,298
The term bank loans are secured by a general security agreement
and by an assignment of the term deposits. Interest paid
during the year was $12,140 (1996 - $11,915)
9. Capital Stock
Authorized -
10,000,000 common shares with a par value of $0.01
1997 1996
Issued -
8,230,625 (1996 - 7,665,100)
common shares $l,837,312 $839,871
During the year, 565,525 shares were issued for $997,441
less costs of $233,930.
GREENWOOD SILVERSTEIN HERLICK & COHEN 8
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CARDCALL INTERNATIONAL HOLDINGS, INC,
Notes to Consolidated Financial Statements
(Expressed in United States dollars)
10. Contingency
Legal proceedings have been instituted against CardCaller Canada
Inc. by a former long distance supplier claiming a sum of $148,000.
Management has filed a counterclaim disputing the amount and has
made a provision of $40,000 in the accounts for this claim as its
best estimate of any liability. Any further liability will be
accounted for as a charge to income in the year incurred.
11. Commitments
The companies are committed to pay rent for their premises of
$4,300 per month to June, 1998.
12. Income taxes
The Companies have unused losses carried forward of $5,500,000
which may be used to reduce future income taxes payable. The
possible benefit of these losses has not been recorded in these
consolidated financial statements.
13. Segmented Information
The Companies operate in Canada and commenced operations in the
United Kingdom. Segmented results for the two years ended March 31,
1997 are as follows:
US Canada UK Consolidated
March 31, 1997
Sales $ $ 3,598,333 $1,177,894 $4,776,227
Gross profit (loss) 67,211 (1,087,248) (1,020,037)
Not loss
from operations (314,496) (814,792)(4,703,185) (5,832,473)
Identifiable assets 343 688,471 872,678 1,561,492
March 31, 1996
Sales $ $4,050,820 $294,775 $4,345,595
Gross profit (loss) 564,335 (134,880) 429,455
Net loss
from operations (32,618) (583,791) (948,074) (1,564,483)
Identifiable assets 107,131 704,362 544,670 1,356,163
GREENWOOD SILVERSTEIN HERLICK & COHEN 9
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CARDCALL INTERNATIONAL HOLDINGS, INC,
Notes to Consolidated Financial Statements
(Expressed in United States dollars)
14. Related party transactions
During the year the companies incurred legal fees of $41,800 (1996 -
$72,000) to a law firm in which certain directors of the companies
were partners.
The companies also paid commissions in the amount of $67,000 to
employees and officers relating to the sale of shares.
GREENWOOD SILVERSTEIN HERUCK & COHEN 10
